Return on Investment
Compared with what?
The idea
ROI compares incremental benefit with resources committed.
In the real world
A tool that saves labor may repay its cost in months.
Going deeper
The word return implies a comparison, and the comparison is usually the part left unstated. A tool saving 200 hours a year is a fact; whether it is a return depends on whose hours, what they cost, and what those hours are then used for.
Three conditions have to hold for savings to become a return: the time must have a real cost, that cost must exceed the price, and the freed capacity must be redeployed to something of value. Hours saved from someone who was not fully occupied, or that get absorbed into slack, produce a real convenience and no measurable return at all.
Where it stops applying
Not every worthwhile purchase has a calculable return. Risk reduction, optionality and morale are real and resist this arithmetic, and forcing a number onto them produces false precision.
Why it matters
It forces a comparison, which is the part that usually goes unstated when someone justifies a purchase.
Try this today
Include time and risk in one ROI estimate.
Test yourself
A £12,000 tool is projected to save 200 hours a year. What has to be true for that to be a return rather than a number?
Show the answer
The hours must belong to someone whose time has a real cost, that cost has to exceed £12,000, and the freed time has to be spent on something of value. Savings only become a return when they are compared against what the money and the time would otherwise have done.
Learn this in the feed Answering from memory, then again days later, is what makes it stick.